WEST LOOP — Over the past two years, Fulton Market has missed out on more than 500 affordable units as developers skirt a city goal to provide more affordable housing in the booming neighborhood.
In 2021, the city lifted a decades-long ban on new residential developments north of Lake Street in Fulton Market, opening a new frontier of housing in an area that had been largely restricted to office, hotel and commercial buildings.
The moratorium’s end allows residential development within what’s known as the Kinzie Corridor Overlay District, an area bounded by Ogden Avenue, Carroll Avenue, Hubbard Street, Halsted and Wayman Streets.
In lifting the ban, the Chicago Plan Commission, Department of Housing and Department of Planning and Development set a goal of 30 percent affordable housing units for new residential developments inside the Fulton Market Innovation District north of Lake Street. Chicago’s Affordable Requirements Ordinance currently mandates 20 percent of units are affordable citywide.
From 2021 to 2022, residential development proposals were expected to “cooperate with the City in good faith” to apply for Low-Income Housing Tax Credits and tax-exempt bonds to finance the construction of the additional 10 percent in affordable units. This agreement was laid out in every development proposal approved by the city.
But none of the seven developments approved by City Council from 2021 to 2022 located north of Lake Street in the Fulton Market Innovation District attained subsidies to build additional affordable units beyond the 20 percent already mandated by the city, according to the Department of Housing.
The extension of the Kinzie Industrial Corridor Tax-Increment Financing (TIF) District at the end of 2022 opened up a whole new funding source for developers to offset the cost of the additional 10 percent affordable units.
Four projects approved this year north of Lake Street in the Fulton Market Innovation District have not applied for the TIF subsidy, according to the Department of Housing. All four were approved by City Council with 20 percent affordability.
But that changed after local Ald. Walter Burnett Jr. (27th) found out the city wasn’t delivering on its promise to bring 30 percent affordability to the area.
Burnett told Block Club Chicago he was disappointed the city’s development team and developers were not delivering on the city’s stated 30 percent goal.
“I feel bamboozled because I’m assuming that they were getting what they asked for,” Burnett said.
In a September Planning Commission meeting, Burnett revealed he intervened to ensure the most recent proposal for the district, at 800 W. Lake St., would include 30 percent affordable units. The 36-story building by Ascend Real Estate Group, once imagined as a hotel, will feature 406 apartments, and 122 of them will be affordable if the subsidy comes through.
“None of those other buildings that we voted on, have committed to those [30 percent] aspirations because the city hasn’t committed to their part of the aspiration where they [were] supposed to subsidize,” Burnett said. ” … We need to change something. Because as far as I’m concerned, it’s a hoax.”
Burnett said he’s disappointed he has to stay on top of the city to incorporate its own affordable housing goals in new developments.
“I got to not only baby developers, but I got to stay on the city’s housing department,” Burnett told Block Club Chicago. “We need to try to come up with our portion of the deal.”
Officials with the city’s Department of Housing said the issue is nuanced. Developers have not secured subsidies because those chose not to apply after learning about their options.
Thanks to a break from Springfield, developers citywide who build required affordable units on-site qualify for a reduction on their property tax assessment. In exchange for the tax break, the units must remain affordable for 30 years.
This tax break has led to a boom in affordable units that will come online in the next three to four years Downtown and across the West Loop. But developers haven’t been willing to pull the trigger on 30 percent affordability for proposals north of Lake Street.
Before TIF funding became an option, developers could also apply for the Low-Income Housing Tax Credit. The Low Income Housing Tax Credit allows property owners to claim tax credits in return for making part of a development affordable.
But regulations with the tax credit would make it hard, and in some cases impossible, for developers to sell the building after it’s completed. After learning about the subsidy through the city, the seven developers did not apply for it, according to Daniel Hertz, director of policy research and legislative affairs for the Department of Housing.
Developers found the tax credit can create issues with resale “or it’s too complex. It takes too long,” Hertz said.
Developers for the seven proposals approved between 2021-2022, did not respond to requests for comment. They include Sterling Bay, LG Development, Fulton St. Companies, Trammell Crow and Shapack Partners. Combined, these developments bypassed including about 270 additional affordable units under the 30 percent goal.
Four developments approved this year have yet to attain building permits and are still able to apply for TIF subsidies. They are located at 1300 W. Carroll Ave., 1300 W. Lake St., 375 N. Morgan St. and 370, 400-01 N. Morgan St. Combined, these developments could provide an additional 287 affordable units under the stated 30 percent goal.
Block Club Chicago reached out to developers associated with these four proposals, none of them responded to request for comment on applying for the available TIF subsidy.
In total with the developments, 5,609 units were approved but developers passed on making 557 of them affordable to meet the 30 percent goal.
The Department of Housing has contacted all four developers to discuss the possibility of applying for TIF funding to fund the additional affordable units, city officials said.
“In general, the use of TIF requires a supplemental multi-family affordable housing TIF application, which must be submitted at least six months prior to the first vertical building permit,” a Department of Housing spokesperson said in a statement.
The process starts with a review from the the city’s internal TIF Investment Committee, and then goes to the Community Development Commission, City Council’s finance committee and eventually the full City Council for approval.
The proposed development at 800 W. Lake St. by Ascend Real Estate Group — which has yet to be approved by City Council — is the only development to attempt to tap into TIF funding to achieve 30 percent affordability.
“If you can pull surplus out of the TIF to balance the budget, you can pull surplus out of the TIF to build affordable housing,” Burnett said.
Department of Planning and Development acting Commissioner Patrick Murphey said the 800 W. Lake St. deal could serve as a model for others if it’s approved by City Council.
“… If we can find agreement with Council, Department of Housing, Law Department, and administration … we would look at putting that forward as a template version of what the ARO and TIF obligations could result in … in Fulton market,” Murphey said at a September meeting. “There are a lot of ‘ifs’ in there.”
Listen to the Block Club Chicago podcast: